-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MRYb3HOClibG4AvM+BH6yTIuZciXzOGS1cbN+7GHtRLSmXMrTkWuNAYiASIgLXDE /o/mvCBrAGAyJb5Rr0tPdw== 0000930413-04-001140.txt : 20040315 0000930413-04-001140.hdr.sgml : 20040315 20040315172512 ACCESSION NUMBER: 0000930413-04-001140 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 20040315 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: PRESIDENT & FELLOWS OF HARVARD COLLEGE CENTRAL INDEX KEY: 0000315016 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] IRS NUMBER: 042103580 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: C/O HARVARD MANAGEMENT COMPANY INC STREET 2: 600 ATLANTIC AVENUE CITY: BOSTON STATE: MA ZIP: 02210 BUSINESS PHONE: 6175234400 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: KOREA FUND INC CENTRAL INDEX KEY: 0000748691 IRS NUMBER: 133226146 STATE OF INCORPORATION: MD FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-36819 FILM NUMBER: 04670577 BUSINESS ADDRESS: STREET 1: 345 PARK AVE STREET 2: C/O SCUDDER STEVENS & CLARK INC CITY: NEW YORK STATE: NY ZIP: 10154 BUSINESS PHONE: 6173305464 SC 13D/A 1 c31443-sc13da.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. 2) THE KOREA FUND, INC. -------------------- (Name of Issuer) COMMON STOCK ------------ (Title of Class of Securities) 500634100 --------- (CUSIP Number) Michael Pradko Harvard Management Company, Inc. 600 Atlantic Avenue Boston, Massachusetts 02210 (617) 523-4400 with a copy to: THEODORE ALTMAN, ESQ. PIPER RUDNICK LLP 1251 AVENUE OF THE AMERICAS NEW YORK, NEW YORK 10020-1104 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) MARCH 15, 2004 -------------- (Date of Event Which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. [ ] Page 1 of 4 Pages
- -------------------------------- --------------------------------- CUSIP No. 500634100 SCHEDULE 13D AMENDMENT NO. 2 Page 2 of 4 Pages - -------------------------------- --------------------------------- - ------------- ----------------------------------------------------------------------------------------------------------- 1 NAMES OF REPORTING PERSONS. I.R.S. IDENTIFICATION NUMBERS President and Fellows of Harvard College - ------------- ----------------------------------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) |_| (b) |_| - ------------- ----------------------------------------------------------------------------------------------------------- 3 SEC USE ONLY - ------------- ----------------------------------------------------------------------------------------------------------- 4 SOURCE OF FUNDS WC - ------------- ----------------------------------------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) or 2(e) |_| - ------------- ----------------------------------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Massachusetts - ------------------------------------ --------- -------------------------------------------------------------------------- NUMBER OF SHARES 7 SOLE VOTING POWER BENEFICIALLY 11,813,400 OWNED BY EACH --------- -------------------------------------------------------------------------- REPORTING PERSON 8 SHARED VOTING POWER WITH 0 --------- -------------------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 11,813,400 --------- -------------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - ------------- ----------------------------------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 11,813,400 - ------------- ----------------------------------------------------------------------------------------------------------- 12 CHECK IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES |_| - ------------- ----------------------------------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 23.75% - ------------- ----------------------------------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON EP - ------------- -----------------------------------------------------------------------------------------------------------
This second amendment (the "Second Amendment") amends and supplements the statement on Schedule 13D, as amended by Amendment No. 1 (the "Schedule"), previously filed with the Securities and Exchange Commission on December 15, 2003 by the President and Fellows of Harvard College ("Harvard"), with respect to the common stock, par value $0.01 per share (the "Common Stock"), of The Korea Fund, a Maryland corporation (the "Issuer"). ITEM 4. PURPOSE OF TRANSACTION. On March 15, 2004 Harvard sent a letter to each of the Independent Directors of the Issuer. The letter stated Harvard's position that the actions taken by the Issuer to address the discount to net asset value have been inadequate, offered to separately discuss its concerns with the Independent Directors and stated that if it concluded that the interest of the investment manager is unduly persuading the Board, it will seriously consider taking steps necessary to remove that influence. The full text of the letter is set forth as Exhibit 99.1 hereto. Except as described above, Harvard does not have any plans or proposals which relate to or would result in any of the actions set forth in parts (a) through (j) of Item 4. Harvard reserves the right to make any such plans or proposals in the future or to take any other steps to enhance the value of its investment. ITEM 7. MATERIALS TO BE FILED AS EXHIBITS. The following document is filed as an Exhibit to this Second Amendment: EXHIBIT 99.1: Letter, dated March 15, 2004. Page 3 of 4 Pages SIGNATURES After reasonable inquiry and to the best of its knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. Dated: March 15, 2004 PRESIDENT AND FELLOWS OF HARVARD COLLEGE By: /s/ Michael S. Pradko ------------------------------------- Name: Michael S. Pradko Title: Authorized Signatory Page 4 of 4 Pages EX-99.1 3 c31443_ex99-1.txt EXHIBIT 99.1 Harvard Management Company, Inc. 600 Atlantic Avenue Boston, Massachusetts 02210-2203 March 15, 2004 Independent Directors of The Korea Fund, Inc. Robert J. Callander Kenneth C. Froewiss William H. Luers Ronaldo A. da Frota Nogueira Susan Kaufman Purcell Kesup Yun c/o The Korea Fund, Inc. Deutche Investment Management Americas Inc. 345 Park Avenue New York, New York 10154 Dear Independent Directors of The Korea Fund, Inc.: We recently received a letter from Mr. Richard Hale that he also released publicly as a communication from the Board. As the Senior Portfolio Manager for all International Equities, I am well versed in the issues surrounding our investment in The Korea Fund, Inc. and I would like to offer this response regarding Mr. Hale's letter. First, however, let me explain why we address this letter to the independent Directors of the Fund. Although we are certain the independent directors take their fiduciary duty seriously, we do not consider Mr. Hale an unbiased party. As a board member of over 200 Deutsche funds and an executive of Deutsche Bank, his allegiance is most certainly with the investment manager. It is not just the actions of management in this fund that make us cautious, but also treatment of shareholders in other Deutsche Bank closed-end funds. For example, Mr. Hale is the President and CEO of the Central Europe and Russia Fund (CEE). Since you are not directors of CEE you may not be aware of a recent development regarding that fund. As directors of a closed-end fund, I expect you agree with the common principle that subscription rights for new shares should not be issued when the fund is trading at a discount; it is dilutive and unfair. Yet, CEE announced a rights issue on February 13 while fund shares traded at an approximate discount of 10%. The rights offering issues new shares at a further 10 percent discount to the price of CEE during a pricing period. Not surprisingly, this extraordinary abuse of shareholders caused CEE to widen from 10% to 16% discount in one week! If the rights offering priced today it would be at a 25% discount to NAV. This rights issue is astounding. When Credit Suisse Asset Management Ltd acted similarly with regard to the Brazilian Equity Fund, shareholders sued their Board, as well as their management and fund. While investors have been weighing in on CEE with their feet - willing to leave the Fund at 90 cents on the dollar just to get out - Deutsche Bank recommended and convinced the Board that a coercive rights issue that dilutes shareholders would be in shareholders' best interests. It may be in the best interest of a manager capturing more fees; it cannot possibly be in the best interest of a shareholder. With this background to explain our skepticism, I would like to address Mr. Hale's letter. Mr. Hale digresses from the real issue with irrelevant references to shareholder differences and our appearances before boards; the issue is whether the actions taken are sufficient to address the Fund's discount price to NAV. They are not. At the Board's invitation, we have offered suggestions and options to the Board regarding the appropriate structure of the Fund in light of this serious and persistent discount. Maybe there was a misunderstanding, but I am assured by all who were present from Harvard at the December 16 meeting that no request was made for the Fund to "mirror" an index. As you will see, there is no rational reason for us to make such a request. The Fund already has very few A-1 distinguishing characteristics from the index we benchmark our Korean investments against: the MSCI index. In fact, if the Fund were able to demonstrate an ability to outperform a benchmark, we would be delighted. Unfortunately, this is not the case. Although Mr. Hale asserts repeatedly in his letter that the Fund has achieved superior investment performance and infers that the manager makes many successful bets against the index, the statistics simply do not support this. Mr. Hale measures the Fund against the KOSPI index. The KOSPI, however, is what we call a "slow rabbit." The MSCI Korea index is not just Harvard's benchmark; we believe it is the most widely used measurement among institutional investors. The alternative is the IFC index. The following table compares our calculation of Fund performance (assuming distributions reinvested) to several indices during the three-year period ended 12/31/03: KF NAV KOSPI KF vs. KOSPI Annualized 3 yr return: 29.3% 20.6% KF 8.7% better KF NAV MSCI KF vs. MSCI Annualized 3 yr return: 29.3% 29.4% KF .1% worse KF NAV IFC KF vs. IFC Annualized 3 yr return: 29.3% 31.5% KF 2.2% worse The Fund appears to have outstanding returns only based on one index. Against the more widely used MSCI and IFC indices, the fund has trailed slightly in performance, but not been extraordinarily different. Mr. Hale claims the Fund makes significant bets relative to the index, both in terms of security selection and capitalization. If this were true, the Fund would have exhibited little correlation with the indices returns. Again, the statistics do not support the assertion. During the same three-year period we estimate the correlation of Fund NAV returns to index returns as follows: KOPSI MSCI Fund Correlation with: 97.9% 99.1% We conclude that the Fund already offers very little to distinguish itself from the MSCI Korean index. In that case, we believe it is topical to ask whether shareholders are best served by the Fund's closed-end structure and discount price. If the Fund has no performance advantage, there are few other considerations that would justify the closed-end format and the continuing large discount. At the time of the Fund's listing, limited alternatives for investors existed. After 20 years the alternatives have broadened considerably. In addition to MSCI Korea iShares, and a broad array of ADRs there is also an open-end fund available. The Fund is no longer the only choice for an investor. In fact, the Korean iShare (EWY), which tracks the MSCI Korea index closely without discount problems, is currently more popular with investors than the Fund. Over the past 12 months the dollar value of trade in Korean iShares has been consistently greater than the Fund and averaged roughly 60% more. A-2 The fees of the Fund exceed other alternatives. The Fund's expenses at 1.26% compare poorly to the Korean iShare at .99%. In addition, an investor could access approximately 75% of the MSCI Korea index through Depository Receipts listed in either U.S. or London and pay no management fee whatsoever. Indeed, investors have recently shown a preference for abandoning the closed end format. In September 2001 the shareholders of the Korean Investment Fund (KIF) voted to convert to open-end from closed-end status. (KIF subsequently liquidated due to high redemptions.) During the Korea Fund's recent self-tender, nearly two thirds of shareholders tendered their shares for redemption - even at a five percent discount to NAV. This strong participation level is clear indication that most shareholders desire an exit at close to NAV. Ten percent proved to be a poor estimate of demand for redemption. We conclude the following: - - The performance of the Fund is ordinary at best - - There are many alternatives to the Fund - - The Fund offers little substantive difference from alternatives - - Management fees of the alternatives are lower - - Most shareholders clearly desire an exit at NAV The Fund has the size and flexibility to do far more than satisfy only one-sixth of the demand for redemption from shareholders. If the manager were skillful, then the Fund would trade at a premium, could convert to open-end status and would gather even more assets. This however is not the case; so if it is clear that the majority of investors want an exit, then conduct a 50% tender. We continue to believe that a minor tender at a discount is inadequate and certainly more in the interest of the fund manager than the shareholders. We would be very happy to discuss these issues in further detail with the independent directors alone. If, however, we conclude that the interest of the investment manager is unduly persuading the Board, we will seriously consider taking steps necessary to remove that influence. Sincerely, /s/ Jeff Larson Jeff Larson Senior Vice President Portfolio Manager - International Equities cc: Mr. Richard Hale A-3 -----END PRIVACY-ENHANCED MESSAGE-----